Despite financial struggles, Chicago State has for years worked to open $60M second campus

Chicago State University officials have signed a purchase agreement for this property in the 3300 block of West Arthington Street for a proposed West Side campus, but funding has dried up. (Jose M. Osorio / Chicago Tribune)

Chicago State University's struggles are daunting: It has half as many students as six years ago. The graduation rate has dropped to 11 percent. Hundreds of employees have been laid off, and the school may run out of money before the end of the semester.

Yet leaders at the Far South Side public school have spent years trying to open a second campus on Chicago's West Side — an ambitious effort pursued with the promise of state funding and a price tag that grew to $60 million.

Even in the face of obstacles — from problems at the main campus to uncertain state support — campus leaders pushed ahead and spent at least $370,000 in taxpayer money planning the new venture. Some pivotal decisions were made in secret as school officials aimed at one point for a grand opening in August 2016, a Tribune investigation found.

University officials conducted a pricey feasibility study, signed an agreement to buy property in the Homan Square neighborhood and chose an architect for the campus, records show. The property owner said in a December interview that he still considered the deal with the university active.

"As soon as CSU gets its money from the state, we are a go," said David Tessler, whose company owns the Homan Square property on the 3300 block of West Arthington Street that previously housed Sears and Allstate headquarters.

State lawmakers agreed nearly eight years ago to provide $40 million in funding to get the second campus up and running, though the university received only $1 million, in August 2011, to start the project's initial phase.

Now, however, the rest of the state money is no longer available and the venture appears stalled.

The university was scheduled to receive another $3 million in start-up money, but that never arrived. Then the entire grant for the project expired on June 30, 2015, after the General Assembly left the money out of its annual capital spending bill. It has not been renewed by the legislature since, although Gov. Bruce Rauner and school officials have asked for it.

It's unclear exactly how much of the $1 million the university has spent so far, but state records show spending on marketing and real estate appraisals, for example. The university also put down a $300,000 deposit on the West Arthington site, and it's unclear whether it will be able to recoup that money if it backs out of the deal.

Chicago State officials, including the interim president, declined to answer specific questions from the Tribune but issued a statement saying that no final decisions have been made related to the "opening, construction, or the purchase of property" for a West Side campus.

The university also denied the Tribune's open records requests for contracts and other financial documents that typically are subject to public disclosure.

University attorneys contend they are not required to turn over information about ongoing "real estate purchase negotiations" until the transactions have been finalized. They also said they do not have to provide information about the contracts "until an award or final selection is made."

The floundering pursuit comes amid a history of questionable decision-making by Chicago State leadership, a legacy Republican Gov. Rauner has criticized and seeks to reverse.

The last president left after just nine months, receiving a six-figure severance on his way out. Ongoing financial concerns have put the university's accreditation at risk. And with no money to spare, the university is facing a multimillion-dollar payout in a whistleblower lawsuit.

After delaying paying damages in a whistleblower lawsuit, Chicago State University was ordered Tuesday to pay nearly $4.3 million — about $1 million more than a jury awarded — to a school official who was fired after accusing the school's former president of misconduct.

And that amount could climb,...

(Jodi S. Cohen and Stacy St. Clair)

Last month, the governor appointed former Chicago Public Schools CEO Paul Vallas, three other new trustees and an outside advisory committee as part of a leadership shake-up to help steer the 150-year-old university toward better financial and academic performance.

Vallas said pursuing another campus may not be realistic and that the university should first address issues like declining enrollment. There are about 3,600 students taking classes at Chicago State, less than half the number in 2010.

Vallas told the Tribune that a second campus would need to be "largely self-sustaining and not primarily dependent on state funding."

"That would only be possible after the university addressed its financial and programmatic challenges and after it developed and implemented a plan to dramatically increase enrollment," Vallas said.

Expansion ambitions

The prospect of a second, satellite campus was raised as early as 2006, when board members mentioned "the proposed $5 million Westside Campus," according to meeting minutes. But trustees were reluctant to back the idea, noting that the existing campus needed tens of millions of dollars worth of capital projects first.

Whatever their initial reservations, board members unanimously voted two years later to advance the project. They did so after they were assured that a new campus would not siphon away students and resources from the main campus and would help an underserved student population on the West Side that did not have easy access to higher education.

The state legislature and governor approved funding for the second campus in July 2009, earmarking $40 million for it as part of a $31 billion slate of construction bills.

With the state money pledged, Chicago State officials went to work in earnest. They created a website dedicated to the project and gathered a steering committee of Black Caucus legislators, city aldermen, trustees and community members.

They scouted potential sites and commissioned a feasibility study in 2013 that evaluated the demographics in dozens of ZIP codes from which the new campus could attract students, extending as far west as the suburbs of Berkeley, Northlake and Western Springs.

The analysis showed that a lower percentage of adults on the West Side had bachelor's degrees compared with Chicago as a whole. It said academic programs for the new campus would respond to industry demands, including preparing students for jobs in community health, accounting and finance, criminal justice, business management and social work.

Cash-strapped Chicago State University spent about $200,000 over the past two years to lobby state lawmakers, including contracts with consultants closely tied to legislative leaders whose inability to pass a state budget has contributed to the school's financial crisis.

With Chicago State's budget...

Cash-strapped Chicago State University spent about $200,000 over the past two years to lobby state lawmakers, including contracts with consultants closely tied to legislative leaders whose inability to pass a state budget has contributed to the school's financial crisis.

With Chicago State's budget...

(Jodi S. Cohen)

The West Side campus would enroll about 200 students in the first year and grow to about 750 students by the tenth year, according to the study, which cost about $256,000, records show.

In an update to trustees in May 2014, then-project manager Bruce Washington reported that an architectural firm had been chosen and that 23 possible sites for the campus had been whittled to five, according to an audio recording of the meeting.

Washington also said the cost eventually would rise to about $60 million as more students enrolled and more space had to be renovated. What's more, in addition to the start-up costs, the project would require an additional $3 million a year from the state to cover faculty and staff salaries that would outpace tuition revenue.

Members of a university budget committee, including faculty, students and administrators, were skeptical that the project made fiscal sense.

"The committee believes that if the operational funds requested for the West Side Campus were not granted by the state, the project is not viable," the committee's 2014 report states. "CSU cannot afford a drain in the budget ... given the resources that we have are already stretched thin."

Location picked

Few other details were publicized after that. Still, behind the scenes, the project proceeded as school officials settled on the Homan Square location over a site closer to the University of Illinois at Chicago campus.

The university signed a purchase agreement for the building and parking garage at the intersection of Arthington Street and Spaulding Avenue in September 2014, according to a report the school submitted to the Capital Development Board, the state agency that manages the distribution of money to public universities.

A budget plan in the report lays out how the university would spend the $40 million from the state, including: $5.25 million to acquire the land, $30 million to renovate the building, $2.1 million for architecture and engineering services, and $400,000 for marketing.

Chicago State contracted with a marketing consultant, a site architect, a zoning attorney and an environmental consultant between August and December of 2014, according to the school's report. It's unclear how much the university has paid those vendors because the school would not provide documents to the Tribune, but the university entered into contracts worth about $660,000, records show.

In mid-2015, then-President Wayne Watson and the property owner signed a revised purchase agreement that allowed the university more time to secure funding and zoning changes, records show.

Chicago State board meeting records provide no indication that trustees publicly discussed or approved any of the spending.The university's spending policy requires that the board approve any transaction over $250,000.

Tessler, the seller who has owned the land since 2004, would not discuss the sale price or other details of the contract.

Interim Chicago State President Cecil B. Lucy and general counsel Patrick Cage said in December that efforts to launch the West Side campus were ongoing, but they declined to answer questions about it.

"That process has not been shut down," Cage said. "We're still in that conversation until the legislature says we're not."

Campus' future

That seems unrealistic. The legislature has been embroiled in a budget stalemate with Rauner for 18 months, and no new capital money is expected to arrive from Springfield until the governor and legislators approve a budget. Since the original grant has expired, Chicago State and its legislative patrons would need to push for funding in a new capital bill.

School officials pointed to the budget impasse as a main stumbling block.

"Over the last decade, various groups in the State of Illinois have been advancing the idea of a Chicago State University Westside Campus," according to a university statement. "The university has worked diligently to plan for a Westside campus and invested a small percentage of allocated funds on a feasibility study, project management, marketing and site procurement. However, in the absence of a 2017-18 budget any further discussion from the university would be premature at this point."

Sen. Kimberly Lightford, D-Maywood, said there is still support for the second campus among Black Caucus members. If funding again became available, legislators would look to move forward, Lightford said.

"I would definitely want to make sure that there's full support from board and the president of the university, that they feel that they've not only restored the campus to where they feel it should be but that they can also sustain taking on an additional campus," Lightford said. "Now it would be up to this new board and new president, at the appropriate time, to see if it's something they can do."

But securing enough state funding to both rebuild and expand will be a tall order. The current campus needs $59 million in maintenance work, according to a report given at the last board meeting.

Student body President Darren Martin does not want to see the project abandoned.

As a senior, he has followed the developments for years and said he understands concerns about whether the timing is right. But he said the second campus could reach more minority, low-income and nontraditional students.

"If we keep saying, 'It's not a great time,' then all of the sudden we'll think it will never be a good time," Martin said. "If we can't provide access to education, then we're doing a disservice to the overall benefit of any American."